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The global economy is being impacted by a number of events, curtailing the ability to conduct business as usual. Should you find your business facing immediate business cash flow issues resulting from an external economic shock, following a clear concise plan can help you manage your way through the crisis.

There are three fundamental steps (Assess, Engage, Act – AEA) to follow in navigating a cash flow issue and safeguarding the future of your business, regardless of the industry.

Cash flow, assess, act and engage

Assess

Gaining visibility and control over cash flows and working capital is fundamental during a time of crisis.

  • Updating 13-week rolling cash flow forecasts to realistically assess your current situation. 
  • Consider working capital needs in the context of overall business requirements for the weeks ahead. 
  • Review all other non-trading contracts / commitments that have a cash requirement over the months ahead and reconsider their necessity.
  • Review trapped and illiquid cash within the group structure. Make use of treasury pooling structures, to make more effective use of available cash that may be lying idly within the group structure

Engage

Making cash management a boardroom priority and engaging with stakeholders early will help you to understand your current situation and reduce any ambiguity between parties.

  • In order of priority, detail an extensive list of stakeholders impacted by the cash flow issue, including Shareholders, Financiers, Customers, Suppliers and Employees. 
  • Make use of funding and liquidity products and engage early with finance providers to address any forecasted deficiencies 
  • Where possible seek more favourable terms from Customers and Suppliers
  • Set out an agreed action plan for each stakeholder  

Act

Delivering upon what you have agreed with Stakeholders will help to alleviate pressure and give you time manage the situation.

Regular variance analysis of actual versus forecasted cashflows should be carried out with variances robustly challenged.

Repeat & continue the AEA cycle

In the longer term, it is important to develop a cash management and working capital strategy.

Using data and analytics, cash management inefficiencies can be quickly identified. An improvement plan for the business should be developed and implemented to achieve sustainable improvements in cash balances and working capital performance.

Cash & working capital checklist

Download our cash and working capital checklist to help navigate your way through these turbulent times.

Get in touch

If your business is encountering any of the issues discussed in this article, please do not hesitate to get in touch with our Working Capital Management team.

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